| Not All Title Policies Are Created Equal |
| By Randy Sierra, Chief Title Officer, CornerStone Title Company |
Most people don’t know the differences in coverage among the types of owner’s title policies. Understanding what your title policy covers is the key to making sure that your policy adequately insures your real estate investment.
A common misconception is that if the lender has a title policy issued on a real estate transaction, then the owner doesn’t need to have one. However, the insured party on the lender’s policy is ONLY the lender, and the home owner will NOT benefit from the issued lender’s policy at all. In order to protect their investment, homeowners should purchase their own title insurance policy.
In California, title companies issue industry standard forms provided by one of two organizations. The American Land Title Association (commonly referred to as the “ALTA”) is a national organization that files forms of policies and guarantees that can be used in the state of California. The other organization is the California Land Title Association, commonly known as the “CLTA.”
Both the ALTA and CLTA have versions of owner’s policies that are nearly identical, so it’s best to identify the different policies from their common names.
For California residential transactions, the base policy is commonly known as the Standard Owner’s Policy. It offers basic coverage that can be applied to all real property. The cost for this policy is known as the basic rate, or the residential rate, depending on the underwriter (the company issuing the policy).
Another type of owner’s title policy for residential transactions in California is commonly known as the Homeowner’s Policy. This policy has 32 insuring provisions, making it much more desirable than the standard policy. The Homeowner Policy costs an extra 10% over the standard policy, but the coverage increase is significant, so most title companies prefer to issue this policy when appropriate for the transaction.
The third type of owner’s title policy for residential property in California is the Extended Owners Policy. This policy is almost never issued in California for residential property because it requires a survey be provided to the title company for review, making it cost about 25% more than a Standard Owner’s Policy. It is the most expensive policy available, but it has two key coverages that make it very desirable for commercial real estate transactions: (1) off-record coverage, and (2) silent lien protection.
Title insurance representatives can help real estate agents and owners review the types of owner’s policies, understand the different coverages, and select the policy that best serves their needs. Only an owner’s policy protects the rights of title to real estate for home owners, so knowing the differences is in the best interests of the home owner.
Click on any icon below to share this article:
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.
Copyright© 2024 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission.
|
|
